How to Buy a Foreclosed Home
Buying a foreclosed home in Washington can be an appealing option for those looking to purchase real estate at a potentially lower price. Foreclosures often present unique opportunities for buyers willing to work through the process, but they also come with specific challenges and legal considerations.
Understanding how to approach the purchase of a foreclosed home and knowing what to expect under Washington law can help you make an informed decision. In this blog, we'll explore the steps involved in buying a foreclosed home, the potential benefits and risks, and how to protect your interests throughout the process.
Understanding Foreclosures in Washington
Before diving into the process of buying a foreclosed home, it's important to understand what foreclosure means and how it works in Washington. Foreclosure occurs when a homeowner defaults on their mortgage payments, and the lender takes legal action to sell the property in order to recover the outstanding debt. In Washington, the foreclosure process can take several forms, but the most common is non-judicial foreclosure, which is handled outside of the court system.
Types of Foreclosures in Washington
Washington primarily uses two types of foreclosure processes.
Non-Judicial Foreclosure
This is the most common type of foreclosure in Washington. It involves a process where the lender can foreclose on the property without going through the court system. Instead, the lender follows a series of steps outlined in the state's Deed of Trust Act, including providing notice to the homeowner and conducting a trustee sale.
Judicial Foreclosure
Less common in Washington, judicial foreclosure involves the lender filing a lawsuit in court to foreclose on the property. This process is typically used when there are legal disputes or when the lender wants to pursue a deficiency judgment against the borrower.
Understanding the type of foreclosure you're dealing with is crucial, as it affects the timeline, legal requirements, and potential risks involved in the purchase.
Steps to Buying a Foreclosed Home
Buying a foreclosed home requires careful planning and a clear understanding of the process. Here are the key steps to follow when purchasing a foreclosed property in Washington.
1. Research Available Properties
The first step in buying a foreclosed home is to research available properties. In Washington, foreclosed homes can be found through various channels, including online foreclosure listings, real estate agents, and local auctions. Many county websites also provide information on upcoming foreclosure auctions.
It's important to gather as much information as possible about the properties you're interested in, including their condition, location, and any outstanding liens or taxes. Doing thorough research upfront can help you avoid potential pitfalls later on.
2. Secure Financing
Before making an offer on a foreclosed home, you'll need to secure financing. Unlike traditional home purchases, buying a foreclosed property often requires you to have your financing in place before you can make a bid, especially if you're purchasing the home at auction.
It's advisable to get pre-approved for a mortgage or have cash available to complete the purchase. Keep in mind that some lenders may have stricter requirements for financing foreclosed properties, so it's important to work with a lender who understands the unique aspects of foreclosure purchases.
3. Attend Foreclosure Auctions
If you're looking to buy a foreclosed home at auction, you'll need to attend the foreclosure sale. In Washington, foreclosure auctions are typically held at the county courthouse or other designated locations. These auctions are often open to the public, and properties are sold to the highest bidder.
When attending an auction, it's important to be prepared. This means having your financing in place, knowing the maximum amount you're willing to bid, and being aware of the terms of the sale. In many cases, the winning bidder will need to pay a deposit immediately after the auction and complete the full payment within a short period.
4. Purchase Through a Real Estate Agent
If buying a home at auction isn't your preferred method, you can also purchase a foreclosed property through a real estate agent. Many foreclosed homes are listed on the market after they fail to sell at auction. These properties, often referred to as "REO" (Real Estate Owned) properties, are owned by the lender and sold through traditional real estate channels.
Working with a real estate agent who has experience with foreclosed properties can be beneficial. They can help you find available REO properties, negotiate with the lender, and guide you through the purchase process.
Benefits and Risks of Buying a Foreclosed Home
While buying a foreclosed home can offer significant benefits, it's important to be aware of the risks involved as well. Understanding both sides of the equation can help you make an informed decision.
Benefits of Buying a Foreclosed Home
Lower Purchase Price: One of the main attractions of buying a foreclosed home is the potential for a lower purchase price. Lenders are often motivated to sell foreclosed properties quickly, which can result in a discounted price compared to similar homes on the market.
Investment Opportunity: Foreclosed homes can present a good investment opportunity, particularly if you're willing to make repairs or renovations. Purchasing a property below market value can provide equity potential, especially if the market improves or the property is improved.
Faster Closing Process: In some cases, purchasing a foreclosed home can result in a faster closing process, especially if you're buying an REO property directly from the lender. Lenders typically want to sell these properties quickly, which can expedite the transaction.
Risks of Buying a Foreclosed Home
Property Condition
One of the biggest risks of buying a foreclosed home is the condition of the property. Many foreclosed homes have been vacant for extended periods and may have suffered from neglect, vandalism, or lack of maintenance. It's important to budget for potential repairs and renovations.
Title Issues
Foreclosed properties can sometimes come with title issues, such as outstanding liens, unpaid taxes, or other encumbrances. It's crucial to conduct a thorough title search before purchasing to make sure that you're not inheriting any unexpected debts.
Limited Inspection Opportunities
When buying a foreclosed home at auction, you may have limited opportunities to inspect the property beforehand. This can make it difficult to assess the condition of the home and estimate repair costs accurately.
Protecting Your Interests During the Purchase
Given the unique challenges of buying a foreclosed home, it's important to take steps to protect your interests throughout the process. Here are a few key strategies to consider.
1. Conduct a Home Inspection
Even if you're purchasing a foreclosed property through an auction, it's worth trying to arrange a home inspection if possible. A professional inspection can help identify any major issues with the property, giving you a clearer picture of what you're buying. If an inspection isn't possible before the purchase, consider getting one done as soon as possible afterward.
2. Perform a Title Search
Before completing the purchase, make sure to perform a thorough title search to identify any outstanding liens, unpaid taxes, or other title issues. A clear title is essential to avoid legal complications down the road. Consider purchasing title insurance to protect yourself against any undiscovered issues.
3. Work With a Real Estate Attorney
Given the intricacies of buying a foreclosed home, it's often wise to work with a real estate attorney who can help you traverse the process. A knowledgeable attorney can review the terms of the sale, conduct a title search, and advise you on any legal issues that may arise.
Buying a foreclosed home in Washington can be a rewarding experience, offering the opportunity to purchase real estate at a potentially lower price. However, it's important to approach the process with caution and a clear understanding of the steps involved.
By researching available properties, securing financing, attending auctions, and working with experienced professionals, you can successfully traverse the foreclosure market and find a property that meets your needs. Whether you're looking for a home to live in or an investment opportunity, being well-prepared will help you make the most of this unique real estate option.
Contact a Real Estate Attorney Today
Are you looking to buy a foreclosed home? Trust in the experience of Curiale Hostnik PLLC to help you through the process. Working with a small firm means getting the one-on-one attention your case deserves. This is because our attorneys get to know the person behind the case, something that many larger firms aren’t able to do due to their caseload. Contact us today to schedule an appointment. We serve clients throughout Tacoma, Washington as well as cities throughout Pierce County, including Puyallup, Gig Harbor, and University Place.